calculation of ratio working capital period whether can be :
ratio calculation :
1. working capital / sales x 365 days ? or
2. working capital / cost of sales or operating costs x 365 days ? and
what is included in the working capital?
thank you
Ask the Tutor ACCA MA
performance measurement-working capital period
11y ago#1There is no such thing as "ratio working capital period".
There is the working capital ratio (normally called current ratio) which is current assets / current liabilities.
There is the working capital period (or working capital cycle) which is receivables days plus inventory days less payables days.
it identifies how long it takes to convert the purchase of inventories into cash from sales and is calculated as :
working capital / sales x 365 days ?
11y ago#3Firstly, what you have written is not a ratio. (Ratios are not measured in days!)
Secondly what measures how long it takes to convert purchases into cash is the working capital period which I have written in my previous reply.
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